Troberg stores

8/7/2019 Troberg stores

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Troberg stores


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COMPANY BACKGROUND


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Kirby Jackson is a stocker, the lowestemployment position, with Troberg s SixthStreet store in his hometown. Troberg store isa chain of small grocery stores located in acluster of small towns in northern Minnesota.Fifteen years later, Kirby had risen to the

position of assistant-store manager.


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JACK-OF-ALL-

TRADE

Troberg Store


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A lthough technically a management position,Kirby s job required him to be a jack-of-all-trades for the Sixth Street store. He worked asa stocker and checker when needed, preparedpurchase orders for three departments, closedthe store several days per week, and trained

new employees.


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Kirby was a quiet and introverted individualwho was known for his punctuality and workethic. Coworkers always called Kirby first if they needed someone to fill in for them.


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$200 $200

$200 $200STORE

MANAG ER OWN ER OFTROBERG STORES


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For Troberg s Sixth Street Store, cashshortages had been a recurring problem. Overthe previous 12 months, A ngelo Velloti, thestore manager, had reported four cashshortages, each exceeding $200, to the ownerof Troberg Stores, Elliot Paulsen.


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REQUIRED $2,000


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Increasing competition from nationwide grocerychains had been slicing away at Troberg srevenues and profits for several years. By the

spring of 1995, Troberg s gross profit percentagehovered at at an anemic 10 percent, meaningthat the Sixth Street store needed to produce@2,000 of revenue to replace the gross profit lost

due to a $200 theft. The gross profit percentagefor comparable grocery chains ranged from 18 to25 percent.


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OPERATINGBUDGET


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A t the same time Paulsen, the owner, wasdemanding that Velloti eliminate the Sixth Streetstore s theft losses, he was slashing the store soperating budget. During the past year, Velottihad trimmed the store s payroll from 30 to 24employees, reducing the store s staff during eachwork shift and assigning more job responsibilitiesto each employee through which he realized that

this provides dishonest subordinates a greateropportunity to take advantage of the business.But when he tried to make that argument toPaulsen, the owner refused to listen.


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MAJOR PROCESS


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The major process inherent in the caseproblem is the Revenue Cycle particularlysales and cash receipts.


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STEPS IN THE PROCESS


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The Sixth Street store had four checkoutstands. During the day, the store s three full-time cashiers staffed checkout stands onethrough three. Kirby, the two other assistantstore managers, the produce manager, andthe dairy manager served as relief checkers.

Relief checkers typically manned register four.


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ONE AF T ERNOON INEARLY MAY 1995.


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AFTER 30 MINUTES

$210


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Violet Rahal, the cashier assigned to register 3,had taken her lunch break a few minutes earlierat 1 pm. When she came back 30 minutes later,she noticed that several items at her work stationhad been rearranged. She was told by Roma, acoworker assigned at register two, that Kirby hadchecked out several customers at her registerwhen she was away. Violet then counted her cash

till and counted it again. Each time, she arrived atthe same total her cash till was short by $210.She immediately reported the shortage to Velloti,the store manager.


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INTERNAL CONTROL ISSUES


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Sup ervision

Some firms just like Troberg have too fewemployees to achieve an adequate separationof functions

These firms must rely on supervision as aform of compensating control

By closely supervising employees whoperform potentially incompatible functions, afirm can compensate for this exposure.


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Segregation of d u ties

Segregating duties ensures that nosingle individual or department

processes a transaction in itsentirety

The transaction authorizationshould be separate fromtransaction processing.

A sset custody should be separatefrom the task of asset record

keeping.

The organization should bestructured so that the perpetration

of a fraud requires collusionbetween two or more individuals


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Acc ess C ontrols

It p revents an d d ete c ts

u na u thorize d an d illegal a cc ess to

the firm s assets an d information .


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Acc ounting re cor d s

By following theaudit trail,

management candiscover where an

error or fraudoccurred

A udit trail


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ASSERTIONS VIOLATED


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Occurrence

Completeness

A ccuracy


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RECOMMENDATION


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G iving trust andconfidence to oneperson is not a bad

thing.

It is advised thatevery other break

of each cashregistrar, they willrecord the total of

their cash till alongwith his/her

signature and theirsupervisor or

manager.

Person withoutauthority or is notassigned to a

specific job shouldnot have access tothat certaintransaction or task.

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Troberg stores